Do both parties need to be of sound mind to enter into an insurance contract?

Author: parastar

Insurance Regulatory And Development Authority (IRDA)

Post author By parastar
Post date June 17, 2021

Insurance Regulatory and Development Authority (IRDA)

IRDA stands for Insurance Regulatory and Development Authority. It is an autonomous body of the Government Of India tasked with the regulation and management of the insurance sector in India. IRDA came into force after the government of India passed the IRDA Act in the Indian Parliament in 1999.

In this article, we will discuss some of the important aspects of IRDA including:-

What is IRDA?
IRDA Act
Functions of IRDA
IRDA Regulations
IRDA Headquarters
IRDA Structure
Chairman of IRDA
IRDA Complaints
IRDA Pan Lookup

What is IRDA?

The formation of an insurance regulatory authority was recommended by the Malhotra Committee in the year 1999. The government acted on this recommendation with the formation of The Insurance Regulatory And Development Authority (IRDA). IRDA is tasked with the regulation of insurance and reinsurance activities, along with the promotion of fair practices and competition among insurance companies. The end objective of IRDA is to ensure what is best for the consumer prevails.

IRDA Act

The INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA ACT came into effect in 1999, with the purpose of amending earlier acts, namely the Life Insurance Corporation Act, 1956, General Insurance Business Act, 1972, and the Insurance Act, 1938. The IRDA Act provides a framework, guidelines, rules, and instructions to insurance companies in India. It is an enforceable act passed by the Parliament Of India.

Functions of IRDA

The following core functions of the IRDA are specified under the IRDA Act, 1999.

Protection of insurance policy-holders, including claims settlements disputes
Maintain a registry of insurance companies in India
Laying down a specific code of conduct for insurance companies and agents
Presenting general guidelines to insurance companies and their agents
Encouraging professionalism among insurance and reinsurance companies
Regulation of insurance premiums
Regulation and over-watch of funds collected by insurance companies
Ensuring the maintenance of the solvency ratio of an insurance company. Thus ensuring the financial strength of the company
Handling of disputes between parties
Providing a framework of efficient and sustainable growth of the insurance sector in India
Correspond with Insurance Ombudsman in matters of dispute among stakeholders

IRDA Regulations

IRDA provides regulations for various branches of the insurance sector in India. They include providing regulatory instructions relating to the general insurance sector, health insurance sector, reinsurance sector. Further regulations relating to brokers, web aggregators, investment funds, expense management, corporate policy, solvency margin, among others.

IRDA Headquarters

The current IRDA headquarters are in Hyderabad, Telangana. Its head office building was established in 2001.

IRDA Corporate Structure

IRDA corporate structure comprises 10 members. A Chairman, 5 permanent members, and 4 temporary members. All members can be appointed for a maximum duration of 5 years. All appointments are made by the Government Of India.

Chairman of IRDA

The current Chairman of IRDA is Dr. Subhash C. Khuntia. Dr.Khuntia assumed the position of IRDA Chairman in May 2018. He has a distinguished service record in the civil services of India, with distinguished positions held in The Ministry of Human Resources, Ministry Of Finance, and Ministry Of Petroleum And Gas

Dr. Khuntia has a Ph.D. in Economics along with holding master’s degrees in physics and computer science.

IRDA Complaints

In case you wish to raise a complaint with IRDA, you will have to contact the Grievance Redressal Cell of IRDA. Mention your complaint on the complaints registration form and send it to the Grievance Redressal Cell.

Alternatively, you can also lodge an online complaint by making use of IRDA’s Integrated Grievance Management System (IGMS)

IRDA Pan Lookup

It is imperative that you know that your agent is registered with the IRDA. If you wish to cross-verify the details of your agent, you may use the IRDA pan lookup tool for the same. Just enter the PAN Card details or Aadhar Card details of your agent in the IRDA pan lookup tool and you should be furnished with the following details:-

Name of agent/company
Date of joining
Company
Date of birth
Insurer company
Agency code
Termination date (If terminated)

If the details are as per your satisfaction, you may choose to continue doing business with the agent.

Life Insurance

List of Life Insurance Companies in India (IRDA Approved)

Insurance

Insurance as a contract (key takeaways)

Post author By parastar
Post date June 17, 2021

Insurance as a contract (key takeaways)

An insurance contract is generally a bilateral agreement between 2 parties. Namely, the insurer and the insured. The insurer agrees to bear a certain kind of risk for a fee (known as a premium). While the insured gets peace of mind knowing that he is covered against uncertainty.

A contract can be termed as an insurance contract if it has valid characteristics under the Indian Contracts Act, 1872. What are these characteristics? They are:-

Competent to contract: Both parties should be of sound mind, not minor, and be competent to enter into a contract.
Free consent of parties: Both parties should enter into a contract without the influence of coercion, fraud, or misrepresentation of any type.
Lawful consideration: The nature of consideration should be lawful (example: legal tender of a nation)
Lawful object: Object of the contract should not be forbidden by law.

If a contract fulfills all the characteristics above and deals with the object of insurance, it can be termed as an insurance contract.

Let us talk about the two important aspects of an insurance contract below:-

Types of insurance contracts
Principles of an insurance contract

Insurance contract types

Contract of indemnity vs contract of certainty

A contract of indemnity is where the insurer is insuring the insured against an event that may or may not happen. For example, a Motor insurance policy is a contract of indemnity, where the insurer will only pay the insured in case of an accident.

A contract of certainty is where the insurer is insuring the insured against an event that is certain to happen. For example, a life insurance policy, where the insured is certain to die. Thus the payment will certainly happen in the event of death.

Principles of an insurance contract

There are 7 principles of an insurance contract, they are:-

Utmost Good Faith
Indemnity
Subrogation
Proximate cause
Contribution
Loss minimization
Insurable interest

Utmost good faith

Both parties, the insurer and the insured have to act in utmost good faith with each other. This means that there should not be any falsification of information by either party. The contract will be liable to be void in case utmost good faith is not maintained.

Indemnity

The insurer will only indemnify the insured against the actual loss caused by an event, and will not go beyond that. For instance, Mr. Mukesh has purchased a motor insurance policy with a coverage of 1 lac. Mr. Mukhes has met with an accident and the damages to his car cost 50000. In this case, the insurance company will pay Mr. Mukesh no more than 50000, even though his policy coverage is 1 lakh.

Subrogation

The principle of subrogation states that after the insured has been paid by the insurer, there is a transfer of ownership of the insured property. For example, Mr. Jay has insured a building and that building has caught fire. Mr.Jay will get his compensation from the insurance company, and the insurance company will now have ownership of that building. The insurance company may now choose to sue any party that they feel caused the fire and recover the dues.

Proximate cause

The principle of proximate cause states that if multiple causes are causing the loss. The closest cause will be considered.

Contribution

The principle of contribution states that in the event that a person takes 2 or more insurance policies for the same insured object, he will only be indemnified against the actual loss suffered and not beyond. For example, Mr. Harish has bought 2 car insurance policies (the first policy has a cover of 2 lacs and the second has a cover of 3 lacs) for his Honda City. Let us assume that he has met with an accident and the cost is 2. Mr. Harish on this occasion can only make a claim for INR 2 lakhs, even though he has a coverage of 5 lakhs across 2 policies.

Loss minimization

The principle of loss minimization states that in the event of an unfortunate event, the insured person will take all measures to reduce the damage caused to the insured object. For example, a person who has bought a fire insurance policy for his home should attempt to extinguish the fire (in case of a fire) if it can be safely done.

Insurable interest

what is insurable interest? The Principle of insurable interest means that there should be financial value attached to the insured property. The policyholder should stand to lose financially in the event that the insured object is damaged, lost, or stolen. If there is no insurable interest the insurance contract becomes compromised.

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The Integrated Grievance Management System of IRDA

Principles of insurance (7 important principles you should know)

Full form of IRDA

Frequently asked questions about insurance contracts

Yes, an insurance policy is a contract between the insurer and the insured.

If you breach the principles of insurance, your insurance policy can be terminated.

Yes, both parties need to be of sound mind under the Contracts Act of India.

Motor Insurance

How to claim car insurance?

Post author By parastar
Post date June 17, 2021

How to claim car insurance?

Excited about purchasing that shiny new sedan? Awesome! But it’s also important to know about the nitty-gritty of its paperwork. One of the most important pieces of paper when it comes to your car is its insurance policy. And one of the most important aspects of your car insurance policy is knowing how to make a claim. We’ll discuss the claim process in detail and you’ll come out of this article with having a proper grasp on how to claim car insurance seamlessly and effortlessly.

But first, let us understand what a claim is.

What is a car insurance claim?

A car insurance claim is the occurrence of the event where the policyholder formally demands the insurance company to pay/reimburse him for the damages caused to his vehicle. If the claim is in accordance with the terms laid within the car insurance policy, the company will compensate the policyholder.

A simple example of this is when a person takes an insurance policy for their car and then meets with a car accident that damages his headlights. The person will make a claim with the insurance company to recover the damages caused to his car. If the claim is valid and in accordance with the policy, the company will pay the policyholder for his damages.

Now let us understand how to claim car insurance and its process below.

Car insurance claim process

The claim process for own vehicle

Let us understand the process in 6 simple steps:-

Step 1: You need to Intimate your insurance agent or company about the accident.

Step 2: Fill up the relevant insurance claim form and submit it along with other required documents like registration, insurance copy, PUC certificate, etc.

Step 3: Post this, the insurance company will disburse a surveyor that will survey the damages and prepare a report.

Step 4: Car repair takes place.

Step 5: You can present your car insurance company with the repair bills and make the claim.

Step 6: The insurance company will issue you the payment if the documents are in order.

If you have a cashless garage clause in your insurance, you may also make use of cashless garages. The insurer will directly pay the garage in a cashless car insurance policy.

Third-party claim process

If you are in the unfortunate situation where a third party claims damages caused by you, the claims process is slightly different. Let us decode this with 5 simple steps:

Step 1: Intimate your insurance company about any potential third party claim.
Step 2: The third party may send you a legal notice for the damages you caused.
Step 3: You should intimate your insurance company about the same and share a copy of the legal notice with them.
Step 4: You will need to submit relevant documentation like car registration, policy copy, Police First Investigation (FIR) Report, etc to the insurance company.
Step 5: The insurance company will pay the claimant the damages (amount will be as ordered by the court).

Car insurance claim rules

Ensure that all claim-related communication is correct.
The policyholder should not partake in any willful falsification
Ensure that claim intimation is done as soon as possible
Ensure that you have proof that an accident has indeed taken place

It is also very important that you are aware of the principles of insurance before you make an insurance claim.

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Understanding your car insurance claims process

What is IDV in Car Insurance

What is RTI in car insurance

How to claim car insurance?

Frequently asked questions about car insurance

Yes, a policyholder can club multiple riders together.

Yes, Third-Party car insurance is mandatory in India. (As per The Motor Vehicles Act, 1988)

Comprehensive car insurance
Third-Party car insurance

Private car insurance
Commercial car insurance

Yes, porting your policy is now possible in India.

You will need to furnish the following documents to your insurance company:

RC book copy
License copy
Transfer fee

Insurance

Effect of GST on insurance premium

Post author By parastar
Post date June 17, 2021

Effect of GST on insurance premium

The Goods And Services Tax (GST) came into effect from 1st July 2017. The introduction of GST affected the insurance sector; specifically on insurance premiums. The cost of getting insured generally went up with the introduction of this tax, making insurance more expensive than before.

Let us understand what are some of the benefits of GST and then discuss the price changes in premium.

Benefits of GST

Tax benefit of up to 1.5 lac per anum is provided as a deduction (including GST amount) under Section 80C and 80D.
Reduction in corruption will have an overall positive impact in most sectors.
Various experts have touted that GST will make insurance and related services cheaper going ahead.

Effect of GST on insurance premium

Effect on life insurance premium

Life insurance premium pre GST was taxed at 15% including Swacha Bharat Cess and Krishi Kalyan Cess. Post GST, life insurance premium is now taxed at 18%. Thus 3% additional taxation has been levied on life insurance premiums. Term Insurance and Unit Linked Plans (ULIPS) are also similarly taxed. Endowment plans are taxed at 4.5% for the first year and 2.25% for subsequent years. Single premium annuity policies are taxed at 1.8%.

Example

Let us understand the GST taxation process with the help of a simple example. Let us assume that Mr. Ajit purchased a health insurance plan from ICICI Lombard, costing him an annual premium of INR 10000 (before GST). He will have to pay a GST of 18% on 10000 I.e 1800 as GST. Thus bringing his total premium payable to INR 11800.

Effect on General Insurance Premium

General insurance and health insurance premiums have also been hiked similarly under GST. Pre GST the taxation was 15%, and post GST the taxation has been elevated to 18%, thus making health and general insurance products more expensive.

Government schemes exempted from GST

Various government schemes are exempted from GST. The primary reason for these exemptions is that most of these schemes are targeted to the low-income group bracket, and the government wants to provide relief to the same. Schemes exempted from GST:-

Aam Aadmi Bima Yojana (AABY)
Janashree Bima Yojana (JBY)
Pradhan Mantri Vaya Vandan Yojana
Varishtha Pension Bima Yojana (VPBY)
Pradhan Mantri Jan Dhan Yojana
Janashree Bima Yojana (JBY)
Insurance policies provided to armed forces (By Government)
Micro life insurance policies

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Tax Benefits on Life Insurance (Calculation & Break up)

Tax benefits of Health Insurance

Frequently asked questions about GST on insurance premiums

18% GST is applicable on insurance premiums in India.

Yes, GST is applicable on premiums paid towards life insurance.

The following Government schemes are exempted from GST:

Aam Aadmi Bima Yojana (AABY)
Janashree Bima Yojana (JBY)
Pradhan Mantri Vaya Vandan Yojana
Varishtha Pension Bima Yojana (VPBY)
Pradhan Mantri Jan Dhan Yojana
Janashree Bima Yojana (JBY)
Insurance policies provided to armed forces (By Government)
Micro life insurance policies

Insurance

Deposit Insurance and Credit Guarantee Corporation (DICGC)

Post author By parastar
Post date June 17, 2021

Deposit Insurance and Credit Guarantee Corporation (DICGC)

Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned corporation of The Government of India. Its main aim is to provide insurance to depositors having accounts in banks in India. This insurance provides a peace of mind to depositors that in the event of a bank failure, their deposits are secure and guaranteed by the government. We will talk about the relevant and important topics of DICGC from the perspective of depositors. . Topics include:

DICGC Act
History of DICGC
Objective of DICGC
DICGC ownership
DICGC corporate structure
DICGC Bank List
DICGC Chairman
DICGC branches
DICGC claim settlement

DICGC Act

The DICGC Act came into power in 1962, and was modified in 2006. The act provides guidelines and mandates important topics like capital requirements, insurance premium, how capital will be paid to depositors in case of default, corporation fund, bank management, bank board of directors, registration of banks, circumstances under which a bank can wind up, RBI advances to banks, and more.

Banks operating in India are expected to follow the mandates under this act. You can read the entire act here.

History of DICGC

India was one of the first nations in the world to introduce a deposit insurance scheme.
The need for a deposit insurance scheme was felt by the Indian Government due to numerous bank failures in the country. Namely, the failure of the Travancore National & Quilon Bank in (Pre-independence), the Failure of the Palai Central Bank, and the Laxmi Bank.
In light of these banking failures, the Parliament Of India passed the Deposit Insurance Corporation (DIC) bill in 1961. This act came into force on 1st Jan 1962.
DICGC, as we know it today came into force after merging with Credit Guarantee Corporation Of India, thus forming the joint entity called deposit insurance and credit guarantee corporation (DICGC) in 1978. DICGC is a wholly-owned subsidy of The Reserve Bank Of India.

Objective of DICGC

The primary objective of the DICGC is to insure small depositors in the event of a banking failure.
The coverage amount has been revised in the 2020 budget from 1 lac to 5 lacs.
This means depositors will be insured up to 5 lacs if their bank fails.

DICGC corporate structure

DICGC is headed by the Chairman, one officer from the Central Government, One officer from the RBI, and 5 additional
Directors.

DICGC Chairman

Dr. M.D. Patra (Deputy Governor of RBI) is the current acting Chairman of the DICGC. Dr. Patra has a Doctorate in Economics (Phd) along with doing postdoctoral research from the prestigious Harvard University in the USA. Dr. M.D. Patra has been a long-standing officer of the RBI, first joining the organization in 1985.

DICGC limit

Every deposit holder is insured by the DICGC up to an amount of Rs 5 lakhs. The principal, as well as the interest amount, is insured under the scheme.

DICGC Insurance (How to avail maximum benefit)

As mentioned above, each depositor is insured only to the extent of 5 lakhs. That being said, if you wish to increase the coverage of your deposits, you will have to split up the ownership or the banks, or a combination of both. Let us understand this with an example.

Example 1

Let us say you want to insure your Rs 10 Lakhs bank deposit. To ensure that your entire 10 Lakhs is insured under the DICGC Scheme, you can deposit Rs 5 Lakhs in bank 1 and another Rs 5 Lakhs in bank 2. This segrigation will ensure your entire Rs 10 Lakh deposit is covered under the DICGC scheme. Just ensure that both banks are covered under the DIGCG Scheme.

Example 2

Let us say you want to insure your Rs 10 Lakh deposit, but you don’t want to split the deposit across 2 banks. You can avail the DIGCG insurance if you deposit Rs 5 Lakhs in one person’s name and the other Rs 5 Lakhs in another person’s name.

You may use your spouse, children, parents, etc for splitting the deposit. You can also use joint names for splitting the deposit, for insurance, the first deposit will have your sole name, the second deposit will have your spouse’s name and your name (as joint account holder). You will ensure that your entire deposit amount is covered if you do this.

DICGC premium

The premium for the coverage is borne by the insured bank. It is probably that the bank collects this premium indirectly from its customers in the form of annual maintenance charges, withdrawal charges, and other similar fees.

DICGC bank list

Well over a total of 1800 banks are insured under the DICGC scheme. DICGC insures Public and Private sector banks, Foreign Banks, Small Finance Banks, Payment Banks, Local and Regional Banks, and Co-operative Banks. Find out whether your bank is covered under the DICGC (tool).

DICGC branches

The corporation has its head office in Mumbai, with 4 additional branches in the metropolitan cities of Nagpur, Chennai, New Delhi, and Kolkata.

DICGC claim settlement

In the event of a bank failure, the failed bank will provide a list of covered deposits to the DICGC.
Post this, the DICGC will vet the list and disburse the funds to a chief liquidator.
The chief liquidator will then pass on the funds to the depositor.

Recent cases of claim settlements include the case of Pioneer Urban Co-operative Bank. The DICGC provided relief to 28382 depositors up-to-the amount of 34533904 in 2019.

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Deposit insurance Coverage

What is Insurance on Bank Deposits?

DICGC Headquarters in Mumbai

Frequently asked questions about DICGC

022-2301 9570

Rs.5,00,000

Deposit Insurance and Credit Guarantee Corporation

Yes. https://www.dicgc.org.in/

Yes, all commercial banks in India come under The DICGC Scheme.

Insurance

Agriculture Insurance Company of India

Post author By parastar
Post date June 17, 2021
No Comments on Agriculture Insurance Company of India

Agriculture Insurance Company of India

Agriculture Insurance Company Of India(AIC) is a wholly-owned subsidy of the Government Of India. It was formed under the Companies Act 1956 and came into existence on the 20th December 2002.

AIC has the founding principles and aims to reduce risks associated with farming activities in India. AIC provides a plethora of insurance-based services and schemes for benefit of farmers across the country.

Some of the notable insurance schemes introduced by The AIC include Pradhan Mantri Fasal Bima Yojana(PMFBY), National Agricultural Insurance Scheme(NAIS), Restructured Weather Based Crop Insurance Scheme(WBCIS), Coconut Palm Insurance Scheme (CPIS), Modified National Agricultural Insurance Scheme(MNAIS) among others.

We will be discussing the following topics with respect to AIC below:-

AIC schemes
AIC ownership
AIC head office
AIC contact number
AIC chairman
Agriculture Insurance Company of India branches

Agriculture Insurance Company Of India (AIC) schemes

Pradhan Mantri Fasal Bima Yojana(PMFBY)

PMFBY has the objective to provide financial coverage to eligible farmers against natural disasters, drought, and insect infestation. Another key objective of the PMFBY is to open up avenues of credit to farmers. The scheme is propagated by the AIC along with partnerships with private companies like Bajaj Allianz General Insurance Company, Future Generali India Insurance Company, SBI General Insurance Company, among others.

Coverage includes:

Protection against natural disasters like Storms, Cyclones, Cyclones, etc.
Floods, Droughts and Landslides
Damage caused due to insect infestation

Exclusions include:

War
Nuclear risk
Theft and riots
Damage caused by animals

Sum insured under PMFBY

Minimum Support Price (MSP) will be provided to affected farmers as a sum insured. If MSP is unavailable for the current year, last year’s MSP will prevail.

Premium rates under PMFBY

Premium rates range from 1.5% to 5% of sum insured or Actual rate (Lesser of the two). For instance, premiums for Kharif season crops are 2.0%. Premiums for Rabi season crops are 1.5%. Premiums for Annual crops are 5%.

Restructured Weather Based Crop Insurance Scheme(WBCIS)

https://www.aicofindia.com/AICEng/General_Documents/Product_Profiles/Restructured%20WBCIS/WBCIS_OGs_23.03.2016.pdf

Restructured WBCIS is a scheme that aims to mitigate the loss to farmers caused due to fluctuations in weather conditions. It aims to provide financial coverage to farmers in the event of unfavorable weather conditions. The goal of Restructured WBCIS is to provide stability to the farmer’s income even in unstable weather conditions.

Protections under Restructured WBICS

Protection against unstable or irregular rainfall (weather excess or lack).
Protection against irregular wind conditions, including Hailstorms.
Protection against High or Low temperature and humidity changes.

Sum insured under Restructured WBICS

The sum insured for crops shall be based on the cost of cultivation and the stage of the crop’s lifecycle.

Premium Rates under Restructured WBICS

Premium rate and structure is the same as under PMFBY

Coconut Palm Insurance Scheme (CPIS)

CPIS was introduced by the Department Of Agriculture (DAC) to minimize the risks faced by coconut farmers across all Indian States and Union Territories.

Protections under CPIS

The following protections are provided to coconut palm farmers under CPIS

Draught, heavy rainfall, tornado, Floods
Accidental Fires, fire caused by lightning, bush fires
Earthquakes and Tsunamis

Exclusions under CPIS

Major exclusions under CPIS include:-

War and related activities
Theft and conspiracy
Nuclear damage
Willful negligence on part of the farmer
Natural mortality

Premium and coverage under CPIS

Coconut Palms between the age of 4-15 have a coverage of 900/palm at a premium payable of INR 9/palm.
Coconut Palms between the age of 16-60 have coverage of 1750/palm at a premium payable of INR 14/palm.

Bangla ShasyaBima (BSB) Scheme

The Bangla ShasyaBima scheme was launched in 2019 as the premier insurance scheme for farmers in West Bengal. The scheme’s aim is to provide insurance coverage and related benefits to farmers of West Bengal and make farm insurance accessible to even the poorest of farmers in the state. The BSB scheme is implemented by the Agriculture Insurance Company Of India.

Coverage under BSB Scheme

All farmers including tenant farmers within the state are covered under BSB Scheme. Once a farmer decides to apply under BSB, he or she will be provided with a certificate of insurance, which he or she may use to handle claim requests among other things.

Protection under BSB Scheme

This scheme aims to protest West Bengal farmers against the risk of weather, failed sowing, excessive rainfall, and drought.

Additional insurance products of AICIL

Along with the various schemes mentioned above, there are certain other additional insurance products offered by the AICIL, they are:

Potato crop insurance
PulpWood tree insurance
Bio-fuel insurance
Rainfall insurance
Weather insurance (RABI season)
Rainfall insurance scheme For coffee (RISC)
Sampoorna Fasal Kawach
Rubber plantation insurance

Claim forms can be downloaded here (https://www.aicofindia.com/AICEng/Pages/other-crop-ins-download-forms.aspx)

AICIL ownership

The majority stake of AICIL is under GIC (35%). Other stakes are under NABARD(30%), NIC (8.75%), Oriental Insurance (8.75), United India Insurance (8.75%), and New India Assurance (8.75%).

AICIL Head Office

The AICIL registered head office is at Plate B&C, 5th Floor, Block 1, East Kidwai Nagar, New Delhi 110023, India.

AICIL Chairman

Mr. Malay Kumar Poddar is currently serving as the Chairman and Managing Director of AICIL. He joined AICIL in 2004, with a previous 18-year experience at GIC. Previous CMD’s of AICIL include Shri Rajeev Chaudhary, Mrs. Alamelu T. Lakshmanachari, Shri R. N. Dubey, Shri Alok Tandon among others. The first Chairman of AICIL was Shri Suparas Bhandari.

AICIL Branches

You may use the AIC branch locator to find out your closest AIC branch.

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National Agricultural Insurance Scheme: An Assurance to Farmers’ Risks

Frequently asked questions about AIC

The AIC was incorporated in the year 2002.

V.M. Dandekar is considered as the father of crop insurance in India.

Pradhan Mantri Fasal Bima Yojana.

MSP stands for Minimum Support Price. The Government decides on the MSP to provide relief to farmers against sharp decline in crop prices.

23 crops

Insurance

What is Term Insurance?

Post author By parastar
Post date June 16, 2021

What is Term Insurance?

Have you ever pondered about what would happen to your loved ones once you’re gone? Will their lifestyle be adversely impacted? Will your children be settled? Will your spouse be in a financially secured position? These are prudent questions to ask if you are the sole earner in the family. The answer to these very pertinent questions is purchasing a term insurance plan.

This article will discuss the details of term insurance and provide you with an in-depth understanding of the product. Topics covered in this article are:

What is term insurance and how does it work?
Benefits of term insurance
Tax benefits of term insurance
Types of term insurance
Example of term insurance

What is term insurance and how does it work?

A term insurance policy provides a life cover that protects your family in the event of your unforeseen demise. The insurance company will provide a lump sum amount to your family after you pass away. In exchange for this benefit, you (the policyholder) will have to pay a regular premium to the insurance company.

The amount of coverage is proportionate to the amount of premium you pay. The higher the premium, the higher the insurance coverage.

Benefits of term insurance

A term insurance policy comes with the following benefits:

Low Premium: A term insurance policy’s premium component will be much cheaper compared to life insurance or an investment insurance plan. Thus you can get maximum coverage at low premiums.

Disability and Critical Illness Cover: A policyholder can opt for an additional disability and critical illness rider at an additional fee. This clause will provide coverage and protection against any disability and critical illness. This increases the coverage of the term insurance policy.

Accidental Death Cover: The nominee can get an additional payout if the policyholder opts for accidental death coverage by paying an extra fee.

Additional Riders: Riders are additional clauses that a policyholder can add within the policy for an extra fee. Riders include terminal illness rider, a disability rider, guaranteed insurability rider, premium waiver rider, accelerated death benefit rider, child term rider, etc. These riders provide an additional layer of benefit.

Tax benefits of term insurance

Under Section 80C: A person can avail a deduction of up to Rs 1,50,000/year under this section. For instance, if your term insurance premium is Rs. 30,000, you can avail of a deduction of that premium under this section.

Remember, other investments like ULIP, PPF, EPF, etc can also be availed for deduction under this section (to a cumulative total amount up to Rs 1,50,000/year).

Under Section 80D: A person can avail an additional deduction of up to Rs.25,000 per year if he avails a critical illness rider within his term insurance policy.

Under Section 10 (10D): Total amount payable on the death of a policyholder is exempt from tax as per section 10(10D).

Types of term insurance

Level term insurance: This is where the premium and the sum insured are constant. The sum insured is paid in the event of the policyholder’s demise.

Increasing term insurance: This is where the sum insured is increased every year.

Decreasing term insurance: This is where the sum insured is decreased every year. These kinds of policies are useful in certain situations.

Return of premium term insurance: If a person opts for this type of term insurance policy, the total premium paid is eligible to the returned to the policyholder during policy maturity. These plans are similar to a life insurance policy.

Convertible term insurance: This kind of policy can be converted into a life insurance policy if the policyholder chooses so.

Example of term insurance

Let us assume that Mr. Sashi (aged 55) bought a term insurance policy from HDFC Life worth Rs 50 Lakhs. Policy term was 30 years. Mr. Sashi has been regularly paying his premium for years and has followed all the principles of insurance.

Unfortunately, he passes away from an illness at the ripe old age of 84. As his term insurance did not mature yet, the company will pay Rs 50 Lakhs to Mr. Sashi’s policy nominee.

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Life Insurance

List of Life Insurance Companies in India (IRDA Approved)

Frequently asked questions about term insurance

The IRDA of India regulates all insurance companies in India.

The following can be considered as the top 3 benefits of taking a term plan:

It provides coverage
It can act as an investment
Premium paid can be considered for tax breaks.

As of 2022, Max Life Insurance Company has the highest claim settlement ratio of 99.34%

Yes, LIC provides a variety of term insurance plans to potential customers.

Insurance

Treaty Reinsurance – Importance, Types, Examples

Post author By parastar
Post date June 16, 2021

Treaty Reinsurance

A treaty reinsurance contract is a contract between an insurance company and a reinsurance company. According to the terms of the contract, an insurance company (also known as a cedent) passes on the risks of a class of policies to a reinsurance company. The reinsurance company will take on these risks for a certain fee. This article will discuss certain important aspects of treaty reinsurance, such as:

How does a treaty reinsurance contract work?
Importance of treaty reinsurance
Types of treaty reinsurance
Treaty reinsurance example
Treaty reinsurance vs facultative reinsurance

How does a treaty reinsurance contract work?

Insurance companies write a staggering amount of policies. The volume of policies handled by large insurance companies is truly massive. An insurance company can easily write millions of policies a year. The more policies that an insurance company writes, the more premium it receives. That being said, along with additional premiums, the risk exposure of the insurance company also increases.

There could be a situation where a disproportionately large number of insurance claims are made in a particular year. How can an insurance company prepare for these expenses while simultaneously maintaining its financial position? The answer is treaty reinsurance.

An insurance company will get into a treaty reinsurance contract with a reinsurance company, where the reinsurance company will provide coverage for a host of insurance policies that the insurance company wrote. Whenever there is a claim made for any of these policies, the reinsurance company will compensate the insurance company proportionately.

This arrangement works for all 3 parties, the insurance company, the reinsurance company, and the end policyholder. The idea is to transfer the risk to safer and more stable hands so the risk of default is mitigated.
An example of a reinsurance company is Warren Buffet’s Berkshire Hathaway Speciality Insurance. It enters into large-scale reinsurance contracts due to the financial strength and risk-bearing capacity of the company.

Importance of treaty reinsurance

Mitigates risk of default: Even if the insurance company defaults on a policy claim, the treaty reinsurance company will step in and handle the claim.

Strong hands bear risk: A treaty reinsurance contract ensures that the strongest hands bear the greatest risks. This is of great importance to the underlining health of an economy.

Protection against natural anomalies: An insurance company may not be in a position to handle a massive claim during natural anomalies such as huge earthquakes, tornadoes, Tsunamis, etc. The risk of default would be high due to the sheer number of claims. A reinsurance company will step in during these times and handle the situation.

Types of treaty reinsurance

There are 5 types of reinsurance treaties, they are:

Quota share
Surplus
Pools
Excess of loss
Excess of loss ratio

Treaty reinsurance example

Let us say that an insurance company wants to mitigate risk on its health insurance portfolio. The ceding company enters into a treaty reinsurance contract with a reinsurer. The terms of this reinsurance contract state that the reinsurer will indemnify the insurance company (only health insurance policies) to the extent of $50 million once the insurance company’s expenses go beyond $100 million.

This means that the reinsurance company will pay the insurance up to a maximum of $50 million for all claim-related expenses over the threshold of $100 million. A treaty reinsurance contract can be set up in a variety of different ways, depending on the situation.

Treaty reinsurance vs facultative reinsurance

A Facultative reinsurance contract is a specialized contract where the reinsurance company decides to indemnify specific risks. These contracts are generally negotiated as one-off contracts and not blanket contracts.

For instance, an insurance company would like to write an insurance policy for a large shipping project, but they are not willing to expose themselves to all the risks associated with this project. To mitigate a certain amount of risk associated with this specific project, the insurance company can enter into a facultative reinsurance treaty.

Life Insurance

List of Life Insurance Companies in India (IRDA Approved)

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Insurance

Principles of Marine Insurance

Post author By parastar
Post date June 16, 2021

Principles of Marine Insurance

Like any other branch of insurance, marine insurance is also governed by certain principles. Understanding these principles is crucial for any marine insurance policyholder. We will be discussing the 7 principles of insurance in context with marine insurance. They are:

Indemnity
Subrogation
Good faith
Contribution
Insurable interest
Proximate Cause
Loss minimization

Let us discuss all these principles with keeping marine insurance in mind.

Principle of indemnity

The principle of indemnity states that the insurance company will indemnify the marine insurance policyholder only till the extent of his loss. A policyholder cannot use his marine insurance policy to make a profit. Let us discuss this with a simple example.

Example of indemnity in marine insurance: Let us say that Mr. Mukesh took a cargo insurance policy with a cover of Rs.10 Lakhs. Now, his cargo was damaged while the voyage and the damages amounted to Rs 5 Lakhs. Mr. Mukesh will only be indemnified to the extent of his damages, i.e Rs 5 Lakhs.

Principle of subrogation

The principle states that when the insurance company pays compensation to the insured, the insurance company assumes ownership of the insured object. Let us understand this concept with an example.

Example of subrogation in marine insurance: Let us say Mr. Sunny is a trader and he has bought a cargo insurance policy from an insurance company. His cargo was damaged due to certain malpractices of the shipowner.

The insurance company will provide the claim amount to Mr. Sunny and after paying the claim amount, they will assume ownership of the damaged goods. The company can use its new ownership to file a suit against the shipowner and recover their damages.

Principle of good faith

The principle of good faith states that the insured, as well as the insurer, must be completely honest and transparent with each other. They should not falsify, misrepresent or lie about any aspects. If they violate this principle, the contract can be terminated.

Example of good faith in marine insurance: Let us assume that Mr. Doshi purchased a hull insurance policy to protect the hull of his vessel. In order to save on some premium, he falsified the age of the vessel. The insurance company found out about this and terminated the policy.

Principle of contribution

This principle states that a person can insure the same object with 2 different insurance companies. Both companies can cover the same object as well as the same risks. The coverage amount can vary.

Example of contribution in marine insurance: Let us state that Mr. Ray has bought 2 cargo insurance policies with 2 different insurance companies, each amounting to Rs.5 Lakhs. Unfortunately, his cargo is damaged at the port and Mr. Ray is left with damages amounting to Rs.5 Lakhs.

Mr. Ray now approaches the first insurance company and gets the entire claim amount of Rs 5 Lakhs. Now, under the principle of contribution, the first insurance company will raise a claim with the second insurance company for Rs 2.5 Lakhs, as the second company also agreed to share the risk. The second insurance company will pay the first Rs 2.5 Lakhs and the matter will be settled.

Principle of insurable interest

Under this principle, a person may only buy insurance for an object that he has an interest in. Insurance can only be bought If loss or damage of that object causes financial strain to the insured.

Example of insurable interest in marine insurance: Let us assume that Mrs. Karuna bought a marine insurance policy to cover any losses to her cargo. Mrs. Karuna could only buy this insurance because if her cargo got lost or damaged it would cause her business financial loss. Mrs. Karuna had a stake in the insured object so she could buy the policy.

Principle of proximate cause

There could be a scenario where an incident was caused due to two or more events. Under this principle, the insurance company will consider the closest cause to the incident while handling claims.

Example of proximate cause in marine insurance: Let us state that Mrs. Pooja bought a cargo insurance policy to protect her cargo. Now, there was an incident where the cargo got damaged and Mrs. Pooja filed a claim with the insurance company.

Upon investigation, the insurance company found out that the proximate cause (closest cause that caused the damage) was not covered under the cargo insurance policy.

Based on this information, the insurance company rejected Mrs. Pooja’s claim.

Principle of Loss Minimization

This principle states that the policyholder must do everything in his power to minimize the loss caused due to an unforeseen event. He must not just sit ideally while his insured object continues to get damaged. He must try to minimize the damage.

Loss Minimization in Marine Insurance: Let us assume that Mr. Shyam took a freight insurance policy to insure his freight.

While on the port, his freight caught fire. Mr. Shyam is obligated to call the fire department, try to put out the flames in a safe manner.

He should not just sit ideally while the freight burns. All attempts must be made to save the freight in a safe manner.

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$ Billion

Valuation of the total global marine insurance market (in 2020)

% CAGR

The marine insurance market is growing at a fast CAGR of 4.1% in Asia

%

Of all marine insurance claims were made due to damaged good while transit

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Marine Insurance: Types, Features, Importance & Principles

Features of marine insurance

Frequently asked questions about marine insurance

FOB stands for "Free on board."

CIF stands for "Cost, insurance, and freight."

Peris at sea include:

Capsizing of ship
Theft
Pirates
War
Fires at sea

The primary drivers of the cost of marine insurance are:

Value of goods insured
Type of journey
Length of voyage

Insurance

Principle of Indemnity

Post author By parastar
Post date June 16, 2021

Principle of Indemnity

Insurance has 7 primary principles that the insurer, as well as the assured, should abide by. They are:

Indemnity
Utmost good faith
Subrogation
Contribution
Loss minimization
Proximate cause
Insurable interest

We will be focusing on the Principle of Indemnity through the article. By the time this article ends you will have a thorough understanding of indemnity, its features, and its benefits. Further, you will also get clarity on the concept through an example. Let us begin!

What is the Principle of indemnity in insurance?

The principle of indemnity states that the assured will be put back into the same financial position that he enjoyed before his incident. The insurance company will only reimburse the assured to that extent, and not beyond. The assured cannot make a profit out of the insurance policy in any event.

The assured will be reimbursed to the extent of the damage caused, nothing more. The insurance company will only indemnify the assured to the extent of the damage, even though the policy value is greater than the damage caused.
Let us bring further clarity to this concept with an easy-to-understand example.

Example of Principle of Indemnity

Let us say Mr. Dheeraj has taken a health insurance policy with a cover of 10 lakhs. Let us assume that Mr. Dheeraj has suffered a minor accident and is admitted to the hospital for treatment.

The total hospitalization expenses amount to Rs 2 Lakhs. Mr. Dheeraj will only be compensated by the insurance company up to Rs 2 Lakhs, and nothing beyond that.

Thus even though Mr. Dheeraj had a cover of 10 lakhs, he was only eligible to receive Rs 2 Lakhs (As that was the actual expense of his hospitalization).

Features of Principle of Indemnity

There is a minimum of 2 parties. i.e an indemnifier and a promisee.
Indemnifier indemnifies the promisee against their losses.
The indemnity contract must be valid under the Indian Contract Act, 1872.
Promisee has the rights to take the indemnifier to court if he fails to make good on his promise.

The Principle of Indemnity Does Not Apply to Which Insurance?

The principle of indemnity does not apply to life insurance and certain types of marine insurance policies. Let us understand why this principle does not apply to life insurance.

Human life cannot be quantified. Thus the loss of this life does not have a definite value attached to it. This is why life insurance policies are fixed benefit policies. i.e The insurance company will pay the pre-decided amount to the nominee in the event of the policyholder’s demise.

The settlement amount is fixed and mentioned on the policy document. This makes a life insurance contract a contingent contract and not an indemnity contract.

Author Bio

This article is written by Team InsuranceLiya.com, an independent website that writes about insurance, finance, health, and more. Our writers have a wealth of knowledge, experience, and degrees in the fields of insurance, finance, economics, and beyond.